Asserting its primary claim, the Income Tax Department has maintained that dues to it will have to be settled first by Vijay Mallya-led Kingfisher Airlines, in the wake of a lender consortium of banks laying claim to "Kingfisher House" in Mumbai to recover part of their loans.

Kingfisher Airlines Limited had deducted tax at source from employee's salary and other payments for many years but failed to remit it to the government account following which it owes over Rs 350 crore as taxes, the Department said.

The I-T Department had attached all assets of KAL and is in the process of recovering its dues by sale and attachment of assets and properties of the defaulter company, it said.

Kingfisher House, located near the domestic terminal of the Mumbai Airport, is under attachment under the second schedule of the IT Act, 1961, the department said in a

statement.

The I-T department's claim that the amount due to the government will have "priority" over other debts comes two days after the Karnataka High Court rejected KAL's plea challenging the move by a consortium of banks to take possession of its prime "Kingfisher House" property to realise part of the debts due to them from the airlines.

The court had said banks could take over the property as per law.

In its statement here, the I-T Department said it is a settled proposition of law that the amount due to the government under any statue and, in this case, under the provisions of I-T Act, 1961, will have priority over other debts.

As such, it said, the dues of I-T Department will have to be settled first before the lender consortium of banks can stake any claim to the property.

Kingfisher Airlines owes the amount to the Department on account of alleged TDS defaults committed many years ago and has been held as an assessee in default from the original date of its failure to remit tax. The airlines had deducted tax, hence the claim of the Department on the property also dates back to that period.

It cautioned that any person transacting in the "Kingfisher House" property will be held in violation of second schedule of Income-tax Act, 1961 and will be liable for all the consequences.

Kingfisher Airlines has been grounded for more than 15 months and Vijay Mallya had stated in September that the airlines was in talks with a foreign investor for potential stake sale but refused to divulge the